Amazon Business Targets $1 Trillion Corporate Spending Market

(Bloomberg News) -- Amazon.com Inc. is going after a new class of customers: other businesses.

The Web retailer unveiled Amazon Business on Tuesday, a new marketplace offering tractor parts, latex gloves, paper clips and millions of other products needed in factories, hospitals, schools and offices.

Amazon, which has amassed 278 million active shoppers, is now aiming for a chunk of the $1 trillion that U.S. companies spend annually in business-to-business purchases, a market where Costco Wholesale Corp., Staples Inc. and others have long been active. Amazon Business is likely to step up competition with rival marketplace EBay Inc., which will soon be fending for itself as a standalone company once it spins off faster-growing PayPal as part of a planned split.

“We want businesses to be able to buy what they need so they can quickly get back to work,” Prentis Wilson, Amazon’s vice president of industrial and scientific supplies, said in an interview.

The new marketplace is essentially a revamp of Amazon Supply, which was rolled out in 2012 to sell more than 500,000 products to customers in industrial and scientific areas. Now, Amazon is opening up the service to include more than 2 million third-party sellers, expanding inventory beyond what it could sell directly.

Now, with Amazon Business, the Seattle-based company is seeking to cater to clients such as Tulsa Community College, which is using Amazon to order test tubes, basketballs, office supplies and other goods, instead of having employees fetch them from local retailers or specialty sellers.

The day-to-day needs of the 15,000-student school translate into about $10,000 in orders a month, a number that keeps growing as more staff embrace e-commerce to buy things they need, according to Terry Lastinger, assistant director of purchasing at Tulsa Community College.

Business Marketplace

Like consumers, businesses are shifting more of their spending online. Some 68 percent of business purchases were made on the Web in 2014, up from 57 percent the previous year, according to a study by Acquity Group. That survey found Amazon to be the leading third-party website for business purchases, used regularly by 17 percent of those polled.

Amazon Business will be a marketplace featuring more than hundreds of millions of products. Buyers will find vastly expanded inventory from multiple merchants, often with discounts for bulk purchases. Sellers will also be able to communicate directly with high-volume business buyers who pre-register as commercial customers, a feature not on Amazon’s consumer oriented marketplace.

Corporate Tools

Amazon Business doesn’t have a membership program similar to Amazon Prime, which is offered to consumers for a $99 annual fee. Instead, orders of $49 or more will get free two-day shipping, Amazon said. Business buyers will also get additional online tools, such as purchasing approvals, order tracking and tax management.

“I really see small businesses gravitating towards this because it’s so easy to use and they can get so many things they need in one transaction,” said Christine Dover, an analyst at IDC. “Don’t discount the size and number of small businesses. There are a lot of them.”